Investing in dividend-paying stocks is an easy way to generate passive income. Many companies pay stable and steadily rising dividends, making them excellent options for those seeking recurring income.
These companies could turn a $1,000 investment into a nearly $50 (and growing) annual dividend income stream.
Realty Income’s mission is to supply its investors with dependable and steadily rising dividend income. The real estate investment trust (REIT) has declared 662 consecutive monthly dividend payments since its formation, with its payments increasing 131 times since its public market listing in 1994.
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The REIT should continue to deliver durable and growing dividend income to its investors. It owns a high-quality real estate portfolio backed by long-term net leases with many of the world’s leading companies. Net leases provide very stable rental income because tenants cover all property operating costs, including real estate taxes, building insurance, and routine maintenance.
Realty Income pays out a conservative portion of its steady cash flow in dividends, enabling it to retain hundreds of millions of dollars each year to invest in additional income-generating properties. The company also has one of the 10 best balance sheets in the REIT sector. These features give it plenty of financial flexibility to grow its portfolio and monthly dividend payment.
Beverage and snacking giant PepsiCo has an illustrious dividend history. The company has raised its dividend for 53 straight years. That qualifies it for an elite group of dividend stocks known as Dividend Kings, companies with 50 or more years of consistent dividend increases.
PepsiCo’s dividend should continue rising. The company invests heavily in product innovation, manufacturing capacity expansion, and productivity improvements. These investments should support 4%-6% annual organic revenue growth. Additionally, ongoing margin improvements should help drive high-single-digit annual earnings-per-share growth over the long term.
PepsiCo also maintains a strong balance sheet, giving it the flexibility to make strategic acquisitions as opportunities arise. It has made several deals in recent quarters, including Poppi, Sabra, and Siete, all aimed at accelerating the transformation of its portfolio toward healthier options. These growth investments should help further support the company’s ability to continue increasing its dividend.
Brookfield Renewable has grown its dividend at a 6% compound annual rate since 2001. The leading global renewable energy company sells most of the power it produces under long-term contracts that link rates to inflation. As a result, it generates stable and steadily rising cash flow.
The company is investing heavily in developing additional renewable energy capacity. It currently has 74 gigawatts (GW) of projects in its advanced development pipeline, nearly double its current operating capacity of 43.3 GW. Brookfield also acquires operating renewable energy assets and development projects to enhance its growth rate.
Brookfield Renewable estimates that its various growth drivers, including its development pipeline and acquisitions, will help power more than 10% annual growth in funds from operations (FFO) per share in the coming years. This projected growth should enable the company to achieve its plan of increasing its dividend by a 5% to 9% annual rate over the long term.
Verizon extended its dividend growth streak to 18 years in a row last fall. That’s the longest current streak in the U.S. telecom sector.
The company supports its high-yielding and steadily rising dividend with durable cash flows. It generates lots of recurring revenue as customers pay their cell phone and internet bills. Verizon uses that money to invest heavily in maintaining and expanding its network, with $17.5 billion to $18.5 billion of planned capital expenses this year. It still has plenty left over to pay dividends, with $19.5 billion to $20.5 billion of free cash flow expected this year, compared with less than $11.5 billion in annual dividend payments. The company uses its excess free cash flow to maintain its strong balance sheet.
Verizon also uses its financial flexibility to make acquisitions. It’s in the process of buying Frontier Communications in a $20 billion deal. That merger should generate over $500 million in annual cost savings while significantly enhancing its fiber network. Verizon’s growing network should enable it to continue increasing its dividend.
Generous dividends backed by strong financial profiles make Realty Income, PepsiCo, Brookfield Renewable, and Verizon attractive investments. Their impressive track record of increasing dividends looks likely to persist, making them compelling choices for investors seeking to convert idle cash into passive income.
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Matt DiLallo has positions in Brookfield Renewable, Brookfield Renewable Partners, PepsiCo, Realty Income, and Verizon Communications. The Motley Fool has positions in and recommends Realty Income. The Motley Fool recommends Brookfield Renewable, Brookfield Renewable Partners, and Verizon Communications. The Motley Fool has a disclosure policy.
